Decoding deductibles: Unveiling the impact of deductibles on your auto insurance


30 Aug 2023

Understanding the Role of Deductibles in Auto Insurance

Auto insurance isn't one-size-fits-all. It comes with various components and one of the most critical but often misunderstood aspects is the deductible. We'll decode deductibles and unveil their impact on your auto insurance.

What is a deductible?

A deductible is the amount of money you agree to pay out of pocket before your auto insurance policy kicks in to cover the rest of the expenses related to a claim. Deductibles are a common feature in various types of insurance, including health, home and of course auto insurance. Simply put, it's your share of the cost in an accident or other covered event.

Different types of deductibles

When it comes to auto insurance, deductibles come in two primary forms: a fixed or dollar-amount deductible and a percentage-based deductible. Let's take a closer look at each:

1. Fixed deductibles

A fixed or dollar-amount deductible is a set monetary figure that you agree to pay when you file a claim. For instance, if you have an Rs. 500 deductible and your car repair costs Rs. 2,000 after an accident, you'll pay Rs. 500, and your insurance will cover the remaining Rs. 1,500.

2. Percentage-based deductibles

Percentage-based deductibles are calculated as a percentage of your vehicle's insured value. For example, if your car is insured for Rs. 20,000 and you have a 5% deductible, your out-of-pocket expense would be Rs.1,000 for a covered claim.

The impact of deductibles on premiums

Choosing a deductible isn't just about how much you're willing to pay when a claim occurs; it also affects your insurance premiums. Here's how:

1. Lower deductible, higher premium

Opting for a lower deductible, such as Rs. 250 or Rs. 500, means you'll pay less out of pocket when you file a claim. However, this convenience comes at a price – higher premiums. Higher premiums are charged to offset the lower deductible, assuming that you'll likely file more claims.

2. Higher deductible, lower premium

Conversely, if you're willing to take on more financial responsibility in the event of an accident, you can choose a higher deductible, often around Rs. 1,000 or more. In return, your insurance company will reward you with lower premiums. This can be a cost-effective strategy if you're a safe driver who rarely files claims.

The balance between deductible and risk tolerance

Deciding on the right deductible involves assessing your personal risk tolerance. Here's a breakdown:

1. High deductibles: For the financially prepared

If you have an emergency fund or savings set aside for unexpected expenses, a high deductible might be a viable option. It can significantly reduce your monthly premiums, making auto insurance more affordable in the long run.

2. Low deductibles: Minimizing immediate costs

On the other hand, if you prefer to minimize immediate out-of-pocket expenses, a lower deductible is the way to go. This is especially beneficial if you don't have substantial savings to cover a high deductible in case of an accident.

Deductibles and claim frequency

Another important factor to consider when choosing a deductible is your history of filing claims. Here's why:

1. Frequent claims: If you have a history of filing multiple claims, it may be wise to stick with a lower deductible.

2. Infrequent claims: Conversely, if you're an infrequent claimant and rarely need to use your insurance, a higher deductible can save you money on premiums over time.


Deductibles play a crucial role in your auto insurance policy, influencing both your out-of-pocket expenses and your premium costs. Understanding the balance between these factors with kotak general insurance, along with your financial situation and driving history, is key to making an informed decision when choosing a deductible. Ultimately, your choice should align with your risk tolerance and your ability to handle unexpected expenses, ensuring that your auto insurance provides protection.

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Team Kotak GIC

The content of this blog has been created and carefully reviewed by the esteemed team at Kotak General Insurance, with the sole purpose of providing valuable guidance and sharing insights on the importance of general insurance. Our objective is to assist users in making informed decisions when purchasing or renewing insurance policies for their cars, bikes, and health. Our expertly curated information aims to empower our readers with the knowledge they need to protect their valuable assets and financial interests.